Q&A Dominic Coyle

Will approved retirement fund make me ineligible for medical card?

I have a query on the impact to the medical card as a result of the Budget. We are a married couple. Our current annual income comprises a private pension of €23,305 and a State pension of €22,469 – a total of €45,774.

We have savings in an ARF fund which is subject to a compulsory 5 per cent annual calculation for tax purposes. My best current estimation would be a gross figure of €8,000. Will this impact our eligibility to a medical card?

Mr J.S., emailAt the outset, let me state that you will not have to take the assumed drawdown from your Approved Retirement Fund into account when assessing eligibility for the medical card.

As you know, the Department of Health and Children assesses all income (and allows for certain outgoings) in determining whether a person or a couple qualifies for a medical card. On issues like earnings, or indeed actual pension income, this is quite straightforward. Where it gets more complex is when you start to take savings into account.

Clearly if there is actual deposit interest income, that income counts towards your total income. Where you have a longer term savings account, the Department has an “assumed” interest rate which it applies in order to assess your income.

So what about your ARF? Approved Retirement Funds are, after all, a savings product – a flexible pension vehicle that allows people to keep their pension savings invested in the market rather than locking themselves into a guaranteed annuity income at an inopportune stage of the cycle.

Again, obviously if you draw down actual cash from the ARF, it counts as pension income and this goes towards your medical card eligibility assessment.

But what happens if you do not tap your ARF? This used to be quite popular until the Government not unreasonably decided that some people were using ARFs as a tax efficient device rather than a flexible pension arrangement.

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It then introduced the concept of “imputed drawdown”.

Under this concept, it is assumed that ARF holders are drawing down 5 per cent of the income in the fund each year – whether they actually draw the money down or not. This 5 per cent is then taxed as income, regardless of whether it is used or not.

However, the Department of Health assures me that for the purposes of medical card eligibility, imputed drawdown is not taken into account, as you never actually have use of the money in that year.

It is worth your while considering whether you should consider drawing down the 5 per cent each year – given that it is being taxed anyway – and will be again when you actually draw it down – and choose to invest it instead in another vehicle, not that this is strictly relevant to the particular issue you raise.

Can IBRC legally ignore my letter?

Further to your reply to Mr A O’R, Cork re his mortgage being sold by IBRC, I am in the same position. I replied to the letter received from IBRC and stated that I would not give permission for my details to be given to potential purchasers, stated what type of group I wanted my mortgage to be sold to, and expressed my annoyance at the whole process.

The reply I received just repeated which processes were going to be followed and when it was going to happen – i.e. a carbon copy of the original letter. The only reference to my letter was a one-liner: “We acknowledge your letter dated August …). Full Stop.

Can the IBRC legally ignore my correspondence like this, especially when they asked for input?

Ms S.F., Meath

The ongoing sale of IBRC loans is causing great consternation at all levels.

As you will see from today’s newspaper, at least one major developer and a large corporate entity are legally challenging the efforts of the former Anglo Irish Bank and Irish nationwide Building Society, so it is very far from being a case of small property owners alone being threatened with a big stick.

Given the legal issues involved, and the fact that all these loans are likely to be sold at a discount that will likely eventually come out of the public purse, I would be surprised if those managing the process were not working within a very precise legal framework.

And by that, I also mean that it is simply not credible that they would be “ignoring” communications they themselves have solicited.

But, equally, I would be very surprised if simple refusal to sanction the process without any alternative offer of how the loan is to be financed would be seen as a proper engagement.

What should probably be of greater concern would be any effort by whomever the loan is sold to – or Nama if that is where it ends up unsold – continues to manage the loan in line with the conditions agreed on it for as long as it continues to perform.

Unfortunately, if the loan is in arrears, and especially if it is a buy-to-let property, it is increasingly likely that the property will be repossessed and sold on the open market to meet the reduced cost paid for the borrowings under the current IBRC Project Sad sell-off.

This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com